All property agents who deal with privately rented properties will be required to sign up to a new scheme that aims to protect both renters’ and landlords’ money, under new laws that came into force in England on 1 April 2019.
The draft regulations were originally introduced on 12 June 2018 to the House of Commons by Housing and Homelessness Minister, Heather Wheeler MP and signed into force in March 2019.
The Client Money Protection (CMP) scheme
The regulations, which are laid out in the Client Money Protection Schemes for Property Agents (Requirement to Belong to a Scheme etc.) Regulations 2018 will protect the funds that landlords and tenants pay to agents, including both rental payments and deposits.
There is currently an estimated £3 billion of client money held by letting agencies across England, which are made up of deposits and rental payments.
The CMP will pay out should the letting agent go out of business, mismanage funds, or abscond with the money they hold.
In addition to this measure, as of June 2019 rental agencies will no longer be able to charge fees to potential tenants, under the Tenant Fees Act. There is some concern that a small minority of agencies may suffer financial difficulties as a result, which could put the funds they hold at risk.
Heather Wheeler MP, said: ‘It is not acceptable that some tenants and landlords are being put at risk of losing out financially, simply because their agent had not signed up to a scheme to protect their money.
‘Whilst the vast majority of agents act responsibly, this new law will prevent people from losing their hard-earned cash through no fault of their own. This will give tenants and landlords confidence and peace of mind that their money is in safe hands whilst with their agent.’
Up until the 1
Failure to sign up to a CMP scheme will result in a fine of up to £30,000.
There are currently five approved CMP schemes to choose from, which are ARLA Property Mark, the National Approved Letting Scheme, Money Shield, UKALA and Client Money Protect.
PropTech entrepreneur and Chief Operating Officer of automated rental payment platform PayProp, Neil Cobbald said: ‘Having several approved CMP providers helps to keep costs competitive for agents, while ensuring that all the schemes work to the highest possible standard in a competitive marketplace.’
To join a scheme, agents will are required to have a client account plus appropriate professional indemnity insurance. The scheme providers will also expect agents to have effective money handling procedures in place.
The introduction of the CMP is not the end of potential changes in the rental market. The Regulation of Property Agents Working Group, which is chaired by Lord Best and comprised of experts from across the property sector is still considering the entire rental property market and whether it can be improved.
They are due to report by summer 2019, and their recommendations may include a Code of Practice, an independent regulator, and the introduction of mandatory professional qualifications for all agents.